Yahoo Looking to Acquire Groupon?

The latest rumor in Silicon Valley:

It’s no secret in Silicon Valley dealmaking circles that Yahoo has been looking at what insiders have called a “transformative” acquisition to jumpstart the company.

And while many think that has to mean grabbing one of the big content companies–such as AOL or Demand Media–right in Yahoo’s wheelhouse, sources said it is actually training its attention on, drum roll, commerce.

That would be local commerce, most specifically, companies such the hot start-up Groupon, which dominates social couponing.

Sources said Yahoo (YHOO) has been eyeing it for possible acquisition, which would put it smack dab in the hot space around local purchasing and consumer information.

via Yahoo’s M&A Strategy–Maybe Local Commerce Rather Than Content (Hello, Groupon!) | Kara Swisher | BoomTown | AllThingsD.

What it means: not surprising that people are sniffing around Groupon. Their success has been phenomenal.  Yahoo! has always been a fan of “local”, so no surprise there but I’m not sure Yahoo! would make a good deal (no pun intended!) buying Groupon though. Their valuation is through the roof and they’ve already started to expand in Europe (and I don’t think Yahoo! is trying to build up that continent). I suspect Yahoo! must also be looking at LivingSocial, the #2 player in the space, and will probably end up buying them.

Advertisements

The Age of Cheap Content and Content Arbitrage

Ken Doctor from the Newsonomics blog covers the acquisition of Associated Content by Yahoo! for a rumored $90 million. He writes an in-depth analysis and offers a sobering conclusion:

Overall, today’s deal is further evidence we’re into the age of cheap content and of content arbitrage. The stream’s being reversed all around the news business, with advertising driving content creation in ways that those of us who fought print advertorials couldn’t once imagine. Content arbitrage is a feature of the landscape as I recently wrote (“The Newsonomics of Content Arbitrage“) and one that modern media companies must learn. How they use its principles will make all the difference in what they and their brands stand for, but the need to understand the principles is reinforced by today’s deal.

What it means: I think these are two key trends to understand if you’re in the business of content production. Companies like DemandMedia or initiatives like Patch (at AOL) are creating scalable platforms to create low-cost content. Content arbitrage, creating specific content that can be easily monetized, is logical from a business point of view (i.e. go where the money is) but it begs the question from a democracy point of view. Who or what will fund important news reporting that doesn’t monetize well?

Another consequence is that it puts pressure on the price paid for articles.  I had the opportunity to hear Luke Beatty, Associated Content’s founder, at the last BIA/Kelsey conference. One of the things that struck me was the “what’s in it for me” for network writers. Beatty told attendees that you couldn’t really make a living with what they pay but writers were getting exposure, were becoming experts through their use of their platform. This has tremendous impact on journalism. At the same conference, Rick Blair, Examiner’s CEO, described the various contributor levels we find on the Web today: pro, pro-am, amateur, user-generated content (Blair mentioned that Examiner is at the pro-am level).

It’s also forcing news organization to think about content production segmentation. Am I in the business of producing all the content I offer to readers? Am I outsourcing a portion of the content production? Do I want to control the technology platform behind that content production?

In a related article about the Huffington Post’s 5-year anniversary, Henry Blodget talks about disruptive technologies. He says “Disruptive technologies, meanwhile, are emphatically NOT better than incumbent technologies–at least not at the beginning. Disruptive technologies are often worse than incumbent technologies.  Their advantage–the reason people begin to adopt them–is that they’re also simpler, cheaper, and more convenient.”

More questions than answers at this point for news organizations but these trends need to be taken into account when building the next strategic plan.

The Real-Time Local War Is Heating Up

A deluge of important news in the local social space this morning, all very relevant from a local strategy point of view.

  1. Yesterday afternoon, PaidContent detailed AOL’s, Yahoo’s and MSN’s aggressive plans for local. All three are attracted by potential local advertising revenues. The article says “Microsoft could integrate content from local bloggers”. As for Yahoo!, they recently “rolled out a new service called “Neighbors,” which lets users ask others in their neighborhood questions”.
  2. In this interview with Stephan Uhrenbacher, Qype’s founder, he reveals the site now has 17.7m monthly unique visitors. He also says that in Germany, Qype is ” larger than the yellow pages in terms of traffic”. From reading between the lines, Qype is thinking about implementing a game mechanism (or reward system) and a check-in system à la Foursquare, two features I recommended in my “perfect local media company in 2014” presentation.
  3. Google just shipped QR code stickers to the 190,000 most popular Google local US businesses. A QR code can be scanned/photographed by a camera phone and links to the Google profile page in Google Maps when activated. The Techcrunch article adds “Local businesses can also set up coupon offers through their Google directory page, which would turn the QR code into a mobile coupon”. Mobile + QR code + coupons = monetization strategy for the real-time Web. Another important data point: “There are now over a million local businesses which have claimed their Google local listing”. Does Google need the Yellow Pages sales forces anymore?
  4. Citysearch partners with Twitter to offer tools to small businesses. Citysearch will display “tweets” on merchant pages, offer the opportunity to merchants to create their Twitter account and offer a reputation management service. A Gigaom article says “Citysearch says it has direct relationships with some 200,000 local merchants”. These things will all be required features of any local search site within a few months.
  5. Techcrunch reveals this morning that Aardvark, the social Question & Answer service, is considering an $30M+ acquisition offer from Google. The service allows people to ask questions to their friends and to the network using instant messenging and social networks.

What it means: expect these kind of partnerships, acquisitions and features deployment to speed up as industry players try to capture market share of the real-time local/social Web. Expect Facebook to make a lot of noise as well in the next few weeks (the aforementioned Gigaom article asks “who wants to take bets on how many hours till Facebook Local launches?”). They are the 900-pound gorilla. In 12 months, we will already have a good idea who will win and who will lose in that space.

I don’t want to sound like an informercial but my company Praized Media foresaw the rise of social Q&A services like Aardvark and that’s why we introduced our Answers module (currently used by Yellow Pages Group) which enables consumers to ask local questions to their network of friends. Based on market evolution, we’re also developing a white-label reputation management service that will enable social media monitoring and small merchant Twitter sign-ups (like what Citysearch is doing) because we believe it’s going to be needed in every local media company in the future. Our real-time search module also allows any media publisher to display related “tweets” on merchant profile pages. And we’re also preparing an eCouponing module to monetize all that real-time activity. We’re basically building the whole social media toolkit for local media publishers. End of infomercial. 🙂

The Globe & Mail Goes Negative on Yellow Pages Group

Saturday’s Globe & Mail’s business section has an in-depth article about [praized subtype=”small” pid=”7ac08d444f37191c8a97699e6530751c” type=”badge” dynamic=”true”] (YPG). The article clearly has a negative tone talking about revenue erosion, the rise of social media and the company’s debt-load. They quote Marc Tellier, YPG’s CEO, extensively but they don’t seem to believe him.

Highlights:

Talking about the positive reputation YPG has in the market, the article says “But that halo has now gone the way of carbon paper”

Talking about revenues, the Globe adds: “Yellow Pages’ 2.3-per-cent drop in the first half of this year seems minor by comparison – except for the fact that the company is carrying $2.5-billion in long-term debt, much of it added during the glory years to make acquisitions. While some paper boats are sinking, Mr. Tellier is trying to keep a heavy vessel afloat, managing a century-old company whose main product is a clunky paper directory…”

Talking about the cut in dividend distribution, “There were a lot of people who felt management said one thing and did something else. Investors hate that.”

About online competition, “The Googles of the world, the Yahoos of the world, local search engines, bigger brands branching out, I don’t believe Yellow Pages can sustain itself”

About online revenues, “The online side of Yellow Pages still accounts for less than one-fifth of the business. It could reach 20 per cent by year’s end if management’s guidance is correct. But the question isn’t whether Yellow Pages’ Internet presence is growing; it’s whether it’s growing fast enough to make real money. On the Web, no one holds a monopoly. As is the case with newspapers and magazines, it’s far from certain whether the Web will be enough to compensate for Yellow Pages’ print losses.”

About social media, “And Yellow Pages faces a threat from another dot-com behemoth: Facebook. Social media is chipping away at the directory’s credibility, click by click. (…) That wasn’t bad for Yellow Pages as long as people were just talking to their neighbours over the backyard fence. But now, social media has made it easy for consumers to swap stories and recommendations on public forums. Word of mouth spreads faster than ever before.”

Tellier’s answer on the social media threat, “Marc Tellier argues that’s not enough. “You can’t run a business on word-of-mouth alone,” he says. “In some categories [the shift to online] is going to happen in two or three years. In others it’s going to take 30 years … I would have lost all my hair at the ripe old age of 41 if I believed a lot of what we’d been reading in terms of the pundits – you know, print is dead and so forth. It’s not true.” Many observers disagree. Much as he would like to, Mr. Tellier can’t separate himself from declines in the rest of the print industry.” YPG’s CEO adds later when talking about the last time he used the print directory: “Could I have solved that problem on Facebook? I don’t think so,” he says. “This is a growth industry … The business is remarkably healthy.”

The article concludes by saying: “Now he’ll just have to convince investors of that fact, make them believe his book isn’t a dinosaur on the brink of extinction. That could be the toughest sale of all.”

What it means: Ouch. I think it’s the first time an important Canadian media writes a very negative article on Yellow Pages Group. To be fair to YPG, I believe the Globe’s business section has always been bearish on the company. So, I’m not really surprised the first article of this kind comes from that news source. I also don’t like the comparison to newspapers. We’re definitely not talking about the same business dynamics. I do have to give kudos to the Globe & Mail for mentioning social media as a credible threat to directory publishers. I obviously don’t agree with Tellier when he says he could not have found the business he was looking for using his Facebook friends. Thousands of business references are being shared on social media sites every day and those contribute to market fragmentation in an already very fragmented world. I do agree with Tellier when he says word-of-mouth is not a strategy in itself but directory publishers need to be able to corral all sorts of leads for small merchants including word-of-mouth (social) ones.

AT&T Advertising Solutions 2Q 2009 Results: Operating Revenues Down 12.5%, Income Down 27.5%

AT&T released their second quarter 2009 results yesterday morning. Like Greg Sterling did, I had to dig down in the Statements of Segment Income (excel) document to find detailed information about their directory business. No information was directly provided in the press release.

Directory operating revenues were down 12.5% in Q2 2009 (vs. the quarter one year ago) at $1,231 million and segment income was down 27.5% (also vs. Q2 2008) at $314 million. No online advertising data was provided.

AT&T Yellow Pages Q2 2009 results 

In related news this week,

  • Yahoo! announced a partnership with AT&T Interactive (read YellowPages.com) to start selling Yahoo! local display ads to Yellow Pages advertisers. As the release says, “The agreement between AT&T Interactive and Yahoo! is the latest addition to the longstanding strategic relationship between AT&T and Yahoo!, which runs across many Yahoo! products and services, including portal and mobile services, as well as powering Yahoo! Local with advertiser content from YellowPages.com.”
  • YellowPages.com introduced a new version of YP.com, the URL they acquired from Livedeal late last year. They’re experimenting with a more user-focused online directory site there, but nothing ground-breaking yet.
  • Finally, in a strange and ironic twist of editorial fate, the Yahoo! Small Business blog was explaining to its readers yesterday “When to Pull the Plug on Yellow Pages Advertising“. Bad timing guys!

More "Local" in Yahoo's Future

(…) discussed what’s emerging as one of Schneider’s top priorities to help jump start the company: more local content and more local ads.

Rather than confine news and other local content to a separate product, Yahoo wanted to extend the “lens of local” across all its programming. That includes everything from being able to show a user news about their hometown on the Yahoo homepage to being able to show them an ad with an offer for their local Costco in Yahoo Mail.

via Yahoo’s Schneider Sees Light Around Local – Digits – WSJ.

What it means: in an interview with the Wall Street Journal, Hilary Schneider, Yahoo’s executive vice president for North America, thinks that the portal will embrace “local” more in the future. Expect Yahoo! to try to push local ads to newspapers and directory publishers’ sales forces.

More "Local" in Yahoo's Future

(…) discussed what’s emerging as one of Schneider’s top priorities to help jump start the company: more local content and more local ads.

Rather than confine news and other local content to a separate product, Yahoo wanted to extend the “lens of local” across all its programming. That includes everything from being able to show a user news about their hometown on the Yahoo homepage to being able to show them an ad with an offer for their local Costco in Yahoo Mail.

via Yahoo’s Schneider Sees Light Around Local – Digits – WSJ.

What it means: in an interview with the Wall Street Journal, Hilary Schneider, Yahoo’s executive vice president for North America, thinks that the portal will embrace “local” more in the future. Expect Yahoo! to try to push local ads to newspapers and directory publishers’ sales forces.